Business tax question

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blue-eye-boy

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My uncle has a butchery, a big one, and live large. He buys expensive cars, goes on luxury holidays, etc etc.

Now he always says that he "must" do it, otherwise he pays too much tax. Now I know, if you buy anything you uses in your business, you can claim VAT back, and it reduces your taxable profit, therefore you pay less tax. But how can he, tell me that he "must" buy expensive cars etc, and then scores on tax?

Look I know he can take dividends out his business, pay dividend tax on it, and then buy whatever he wants, but there's no tax saving in there. For instance, I know there is guidelines on what I can buy for the business which is tax friendly, like I can buy a single cab bakkie, but not a double cab. I just heard it via via, so I dont know the specifics.

How does that work, and where can I get info on this stuff, our auditor is not sure on this too, so he's not the one to ask.

Thanks
 
jacqvt said:
My uncle has a butchery, a big one, and live large. He buys expensive cars, goes on luxury holidays, etc etc.

Now he always says that he "must" do it, otherwise he pays too much tax. Now I know, if you buy anything you uses in your business, you can claim VAT back, and it reduces your taxable profit, therefore you pay less tax. But how can he, tell me that he "must" buy expensive cars etc, and then scores on tax?

Look I know he can take dividends out his business, pay dividend tax on it, and then buy whatever he wants, but there's no tax saving in there. For instance, I know there is guidelines on what I can buy for the business which is tax friendly, like I can buy a single cab bakkie, but not a double cab. I just heard it via via, so I dont know the specifics.

How does that work, and where can I get info on this stuff, our auditor is not sure on this too, so he's not the one to ask.

Thanks
Click to expand...

your auditor doesnt know basic tax ? well there is no legal way he can save the tax. But if he is classifying it as things for business use, then yes he will get a tax deduction.

As for the single and double cab. A double cab is seen as a motor car as defined, and therefore it is denied an input tax deduction.

Where to learn this ? go to uni :P
 
Doesn't sound all that legit tbh.

You can attempt to claim luxury holidays as a business expense, but if SARS ever takes a closer look at it then he could be in serious trouble because doing so ranges from decidedly sketchy to 100% illegal depending on the surrounding circumstances.
 
HavocXphere said:
Doesn't sound all that legit tbh.

You can attempt to claim luxury holidays as a business expense, but if SARS ever takes a closer look at it then he could be in serious trouble because doing so ranges from decidedly sketchy to 100% illegal depending on the surrounding circumstances.
Click to expand...

+1.

In short he could be nailed for tax fraud or tax evasion. Not a pretty picture either way.
 
Your uncle is defrauding the tax man. Eventually it will bite him in the ass.
 
Well to be fair, thats what his uncle says, but he might not be a tax expert. If he makes use of a decent tax practitioner, that is not a backyard mechanic and have some integrity he will treat the transactions appropriately for tax purposes. So saying he is evading tax with the limited information, is somewhat harsh don't you think?

Just for interest sake. For an individual to have any benefit (in other words, paying less taxes) from receiving dividends (from his own company) instead of paying a higher monthly salary he would need to earn more than R1,150,000 per annum (taxable after all deductions) when STC were still applicable and now with the new dividends tax it's more than R2,500,000.
 
Your uncle shouldn't gamble with taxes...the steaks are too high. He'll get the chop.
 
screw SARS - pay as little as you can, as it gets wasted and stolen in any case
 
Another thing, there's other benefits to buying vehicles than just the input VAT on the purchase of the vehicle. If it's used for business you also get a 20% deduction for tax purposes.
 
your uncle's tax person could very well have advised him to put his money into a loan account. this is legal and he will only pay tax on the interest and with the new tax laws, the dividends.
 
Okay so I get it he is not that fair to the tax man. But as for the vehicles and so forth, buying it in business name, where can I get accurate info on what can be deducted, and what VAT can be claimed back on what. I couldn't find the info on SARS website, or I just dont know what to look for. I really dont have th guts to evade tax, just want to do it right.
 
luxury vehicles are not included when claiming VAT back. it's only when the vehicle is used specifically for business purposes that he can claim the vat back on it. he can also claim the depreciation on the business vehicle on his business tax return.
 
Jacqvt, to be fair, your imagination might be running away with you -- it doesn't seem that you have enough definite knowledge about what exactly your uncle is claiming as a business expense. (I remember your previous post about your mother at the butchery.)

For example, do you know for sure that his 'expensive holidays' are being reported as a business expense, or is this just speculation? Also, he might well be buying an 'expensive car' as a company asset where the company fully pays all taxes due on it, but simply keeping it off his own personal balance sheet, which is perfectly legitimate ... to know this you will need to have sight of both his personal and the company's taxes, and it is evident that you don't. So it's pure speculation on your part, and you might well be drawing the wrong conclusions, so reporting this could end up doing a whole lot of needless harm.

My advice is: keep your own nose clean, report and pay your own taxes with scrupulous honesty, and keep your nose out of other people's financial affairs. If you are a director or office-bearer in the company, ensure you scrupulously execute your corporate gubernatorial responsibilities. More than that is meddling in other people's business and always brings strife.
 
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jacqvt said:
My uncle has a butchery, a big one, and live large. He buys expensive cars, goes on luxury holidays, etc etc.

Now he always says that he "must" do it, otherwise he pays too much tax. Now I know, if you buy anything you uses in your business, you can claim VAT back, and it reduces your taxable profit, therefore you pay less tax. But how can he, tell me that he "must" buy expensive cars etc, and then scores on tax?

Look I know he can take dividends out his business, pay dividend tax on it, and then buy whatever he wants, but there's no tax saving in there. For instance, I know there is guidelines on what I can buy for the business which is tax friendly, like I can buy a single cab bakkie, but not a double cab. I just heard it via via, so I dont know the specifics.

How does that work, and where can I get info on this stuff, our auditor is not sure on this too, so he's not the one to ask.

Thanks
Click to expand...

Your uncle does nothing wrong.There are way too much assumptions in this thread,except sane advice from Arthur.

I'm sorry but you have a crappy auditor if he/she doesn't know one of the oldest tax tricks in the book.And if you have to ask your auditor and not your uncle,you might just not be ready for that type of info.
Oh,and i can assure you...it has nothing to do with VAT.
 
I understand why you guys posted the above few threads. When I read my first post again, I saw that it sounded like I say he's doing it wrong, maybe I did, but it wasn't my intention to do so. I was just saying what he always tells us.

What my intention was, and really it was, is I want to know what can be claimed as business use (VAT and TAX). Because as I heard before, and as stated in one of my posts, I know I can claim VAT on a single cab bakkie, and it has a tax benefits too. But take for instance that I see that our office ladies need a small car, something like a suzuki swift, to buy office supplies, do shopping at makro for the business, I can also use it to attend branch meetings, etc. Can that car also be bought in the business, VAT claimed back, an has tax benefits? I understand completely that a AMG ml merc doesn't fit the profile of a office vehicle, but I want to know for sure what is law, and whats not.

Sorry if I started this thread wrong. I wont report anyone to SARS, as said before, the money is getting stolen anyway, or poured into SAL again, so thats not whats bothering me. I want guidelines on what can be done, and what not.
 
jacqvt - go to the SARS website and check there for info. look for VAT and you will find all the information you wanting there. if you don't find it there then contact the call center on 0800007277 and ask the agent. they are trained to answer these questions for you.

justask - sorry but your statement about someone not knowing the oldest tricks in the book is just dumb. these days there is no getting away with anything with SARS. you either be honest with them or pay the price for trying to play them for fools.
 
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